From a household point of view the two major changes associated with the economic disruption of the last eighteen months are, first, that the unemployment rate and presumably the risk of unemployment have risen sharply, and secondly, that there have been large declines in asset prices. It is...

This paper describes the National Institute’s Benefit and Tax Model, NIBAX and provides results of studies using it to explore i) the introduction of low-cost pensions similar to Personal Accounts, ii) the effects of the abolition of the 10p income tax rate and iii) the consequences of rising...

This paper describes a structural dynamic microsimulation model of the household that has been developed at the National Institute for exploring behavioural responses to various aspects of the economic environment, particularly in relation to tax and benefits policy. The model is based upon the...

The design of welfare benefits is a tricky business. In this respect, James Meade placed particular emphasis on the importance of avoiding excessive distortions to the price of labour. Nevertheless, Meade noted that means testing in the delivery of welfare benefits is likely to be desirable in...

A dynamic microsimulation model of cohort earnings based on the Australian population aged between 20 and 55 years is described. A highly parsimonious modular structure is adopted to facilitate sensitivity analysis and enable additional characteristics to be added, should they be desired....

Means testing plays an important role in the UK state pension system. We use a dynamic programming model to consider the long-term behavioural effects of a recent policy reform that reduced the marginal tax rates on private income of means tested retirement benefits from 100% to 40%. Our...

This paper explores the pricing of annuities in a structural overlapping generations model in which the mortality rate of people when old is uncertain. A market clearing price for annuities is established below the fair price. At this price the willingness of old people to pay the young to carry...

This study uses a stylised simulation model to consider potential behavioural responses to the reduction in pension taper rates associated with replacing the Minimum Income Guarantee (MIG) with the Pension Credit (PC). A range of long-run responses to the policy change are identified, summarised...

We develop a simulation model of household behaviour in which both the consumption/saving and labour/leisure choices are endogenous. This model is used to explore the effects of the UK and Danish state tax and benefit systems on the labour supply of workers aged 50 or over. We find that, in...

This paper explores the effect of aggregate mortality risk on the pricing of annuities. It uses a two-period OLG model; in the first period, ‘young’ people have a zero probability of death, and in the second period ‘old’ people face an initially unknown risk of death. Old people can...